Rajan hopes to see strong growth in second half of fiscal

Updated: Thursday, November 14, 2013, 9:29 [IST]

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The Reserve Bank of India (RBI) governor Raghuram Rajan on Wednesday said that the economy will witness stronger growth in the second half of this fiscal, led by good monsoon and the associated pick up in consumption, the very healthy exports, and the strong growth in the power sector.

The statement of RBI governor came on the backdrop of rising concerns over economic growth after recent IIP data which showed industrial output grew at a pace below the expectations.

Rajan also decided to address concerns of markets over interest rate hikes and rising inflation, which is further fuelling speculations of more hikes in coming months.

"Food inflation is still worryingly high, and the effects of the harvest are still awaited. But looking through the headline numbers, I am somewhat more heartened by the outcome of core CPI inflation, which declined to 8.1 per cent from 8.5 per cent in September. The momentum for core inflation is also on the decline," said the RBI governor.

"RBI is concerned about the weak economy as well as high inflation. We believe the weak economy, increases in food supply, and recent policy rate hikes will provide a disinflationary impetus over time, and recent data do not dispel this view," he added.

"We will watch the incoming data carefully, especially looking for the effects of the harvest on food prices as well as the second round effects of fuel price increases and exchange rate depreciation, before we make further decisions on interest rates," he said.